Direct materials budget (Learning Objective 2) Breadmaster produces organic brea

Question

Direct materials budget (Learning Objective 2) Breadmaster produces organic bread that is sold by the loaf. Each loaf requires 1/2 of a pound of flour. The bakery pays $2.00 per pound of the organic flour used in its loaves. The bakery expects to produce the following number of loaves in each of the upcoming four months: S9-6 July 1,540 loaves 1,820 loaves 1,460 loaves The bakery has a policy that it will have 20% of the following month's flour needs on hand at the end of each month. At the end of June, there were 154 pounds of flour on hand. Prepare the direct materials budget for the third quarter, with a column for each month and for the quarter.

Explanation / Answer

Direct materials budget

July August September Quarter Budgeted production 1,540 1,820 1,660 5,020 Pounds of flour for each loaf 0.5 0.5 0.5 0.5 Total pounds of flour required 770 910 830 2,510 Desired pounds in ending inventory 182 (910*20%) 166 (830*20%) 146 (1,460*0.5*20%) 146 Pounds of raw material required 952 1,076 976 2,656 Pounds in beginning inventory 154 182 (910*20%) 166 (830*20%) 154 Pounds of material to be purchased 798 894 810 2,502 Cost per pound 2 2 2 2 Cost of materials to be used in production 1,596 1,788 1,620 5,004

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